Philippine Seven expands green and digital innovations in convenience retail

The company accelerates store expansion, enhances digital engagement, and navigates economic challenges to sustain growth.

The Philippine convenience store industry is undergoing significant changes as economic factors, digital transformation, and regional expansion shape market dynamics. Philippine Seven Corporation, the operator of 7-Eleven stores in the country, is responding to these trends with a focus on sustainability, digital engagement, and aggressive expansion.

According to Jose Victor Paterno, President and CEO of Philippine Seven Corporation, convenience store sales have flattened despite a strong first half of 2023.

"I think unfortunately, flat, flat sales. We're not sure why. I think that's the question in everybody's minds," Paterno said. He pointed to inflation and changing consumer spending habits as possible factors. "Obviously, inflation does not keep up with inflation," he noted, adding that "down-trading"—consumers opting for lower-cost alternatives—has become more evident.

Another challenge affecting retail performance is the downturn in the real estate sector, which Paterno believes has had a ripple effect on consumer spending. "If you look at the timing, when sales started to flatten, it was in the second half. It certainly hit the real estate sector really hard. So there's got to be follow-on effects with other industries," he said.

Despite these challenges, the company is seeing strong store performance outside Metro Manila. "More than half the stores we're opening this year are in Visayas and Mindanao," Paterno said, attributing this to an increase in remote workers and freelancers boosting local economies. However, he also expressed concern about the potential impact of artificial intelligence (AI) on these job markets. "AI now could challenge that, and so I worry about that. But there's nothing you can do, right? You just build, act in the moment," he said.

Philippine Seven’s approach to digital engagement has evolved over the years, with shifts in investment and strategy.
"You know, we used to be a lot better at digital," Paterno admitted. "We certainly spent a lot more money in 2018, 2020, till COVID." The company’s digital engagement relies heavily on loyalty programs and online platforms. "You connect through your loyalty app. That’s how you connect," he explained.

However, the rising cost of digital talent has posed challenges. "Digital is all about spending and spending and spending money in the hopes of a future return," Paterno said. "If the people spending it don’t know what they’re doing, there will be no future return. And those people are expensive, and they got really expensive during COVID." To manage costs while maintaining digital engagement, the company is exploring partnerships to optimize resources. "We’re kind of looking like a partnering module maybe makes more sense," he said.

Despite economic uncertainties, Philippine Seven remains committed to expansion, with plans to open 500 new stores this year.

"I think we continued. We're building 500 stores this year," Paterno said. With a current network of 4,000 stores, he sees significant growth potential in the Philippine market. "Nielsen said there are about 7,000 of what they consider convenience stores in the Philippines. The population is 116 million. Thailand, with a population of 60 million, has 15,000 stores," he noted, emphasizing the gap in store density.

However, expansion is constrained by logistical challenges, particularly in geographically isolated areas. "The thing with convenience stores is you need to build the distribution center. You cannot function without a distribution center," Paterno said. "You need, like, 100 stores for that to work, for that to make money. If it's just 20, no."

As Philippine Seven Corporation navigates the evolving retail landscape, its strategy remains focused on regional expansion, digital optimization, and adapting to shifting consumer trends.